Yue Yuen strike shows changing face of manufacturing in China

Industrial action prompts Adidas and others to move production to other markets

Pro-democracy lawmaker Leung Kwok-hung sticks a protest sign in support of a strike by workers of Yue Yuen Industrial Holdings in Dongguan, during International Labour Day in Hong Kong on May 1st, 2014.

Pro-democracy lawmaker Leung Kwok-hung sticks a protest sign in support of a strike by workers of Yue Yuen Industrial Holdings in Dongguan, during International Labour Day in Hong Kong on May 1st, 2014.

Tue, May 6, 2014, 01:15

China is often discounted lately as a basic manufacturing centre. Some say it’s become too expensive or too high-tech or that everyone is now making their stuff in Vietnam or Cambodia now. So it was a surprise for some to hear of the strike in recent weeks in the Hong Kong company Yue Yuen’s Gaobu factory, which manufactures for Adidas and Nike.

This was one of the largest ever work stoppages at a private business in the country. It also makes goods for New Balance, Asics, Puma and Timberland on the 1.4 million sq m site.

The factories of southern China certainly put brand competition into a new light: Nike, Adidas and Puma are arch-rivals in the sports-shops, but their goods all come from the same factory in southern China. The work stoppage over social security payment irregularities led Adidas to move some future production away from the Yue Yuen factory.

I remember writing a few years ago that Adidas was no longer manufacturing in China, so clearly something happened along the supply chain to bring the “Brand with the Three Stripes” back to China.

The Herzogenaurach, Germany-based sportswear maker insisted it “has a highly flexible supply chain in place”. Nike said the same thing.

Employees in Dongguan, in southern China’s Guangdong province, went on strike over benefits and pay for about 10 days. And indeed, this is a large facility – the company has 45,000 workers at the plant, and 80 per cent of them have returned to work after the industrial action. The stoppage cost the company about €19.5 million in direct costs, settlement costs for the more-than-week-long strike, lost profits and additional air freight costs. Also, the deal will raise employee costs by about €22.35 million this year, the Hong Kong-based company said in a stock exchange filing. The strike started after a worker at the plant checked the balance on his social security account and discovered the company had been underpaying its contribution.

China’s human resources ministry intervened directly, telling the company to rectify benefit payments to workers, who demanded more pay and employer contributions to social-security accounts. It said that Yue Yuen didn’t “truthfully report” social security payments it was making for employees at its factories in Dongguan.

Yue Yuen will make contributions to cover the missing payments, although it’s not clear how much was involved. This is in addition to adjusting future benefit payments and giving each worker an additional 230 yuan (€26.50) a month living allowance.

In 2012, Yue Yuen had 423,000 employees at its factories in China, Vietnam and Indonesia, according to its website.

While backing the workers, the government is also wary of any displays of public disharmony.

Monitoring group China Labour Bulletin said on its website that strikers at the Dongguan facility numbered at least 10,000, while Yue Yuen said April 16th that more than 1,000 were involved.

Police with riot gear and dogs were present outside Yue Yuen’s Dongguan complex on April 21st and dozens of workers were taken away by police, the official Xinhua News Agency reported, without saying why the workers were taken.

A prominent labour activist who helped striking workers at the Yue Yuen shoe factory has been detained. Lin Dong of the non-governmental group Shenzhen Chunfeng Labour Justice Service Department was being held in Guangdong’s Dongguan municipal detention centre on charges of stirring up trouble.

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